INTRODUCTION TO SCM : CONCEPT CHECK EXERCISES a. Integer Programming : Problem/Assignment Set 1.

Indian Institute of Science Bangalore offer 210 post graduate courses for the students of various disciplines. Many of these courses are interdisciplinary and students from various branches take the courses. For example the course in Linear Algebra (code MA261) is taken by the students of Electrical Engineering, Physics, Management, Genetic Engineering and Atmospheric Sciences. The student section of the Institute keep a file which records the code number of courses taken by all the students (around 1500 in number) in the Institute. Institute face major problems while conducting the examinations as the Institute policy stipulates that examinations should be over in 7 days (2 sessions per day). The Institute has 25 class rooms. You are requested by the Institute to formulate a Optimization Model that will give the examination schedule. The requirements are i) No student should be asked to take more than 1 examination at the same time ii) The maximum number of examinations that can be scheduled at any one time is limited by the number of class rooms iii) As far as possible a student need to take only maximum one examination per day. If Institute provide you the capacity limitations of these 25 class rooms as well as departmental preference of conducting the exam on a particular room, how will your model change? 2. Bangalore Transport Service (BTS) is grappling with the problem of dead mileage. Dead mileage refer to the distance traveled by the buses from the depot to the first point in the morning as well as its journey back from the last point to the depot in the evening. BTS has 2400 buses and each bus has an average of 14 schedule every day. There are 6 depots in the city with varying capacity. BTS provide you with following File 1 : Depots and Capacities File 2 : The bus numbers and the schedules File 3 : A distance matrix from all the depots to various points Formulate a mathematical programming model that will minimise the dead mileage. Please indicate how you will use the data given in the files (alternate approach is create sample files and illustrate the model) If BTS provide you with the mechanical facilities available for maintenance of vehicles (for example Indira Nagar Depot cannot maintain

Leyland Buses, Kengeri cannot hold double deckers etc.) at each depot and the details of buses (there are 6 categories) how will your model change? What data is required? 3. Shakthi LPG is looking for a consultant to advise them regarding the number of bottling plants required to be set in India. Shakthi has an LPG bulk stocking terminal at Kakinada in Andhra Pradesh and planning to serve the regions in Kerala, amil Nadu, Karnataka, AP, part of Orissa and part of Maharashtra. The various cities and expected demand figures are given. The company has option of setting up plants of 5 different sizes (tiny, small, medium, large, complex each having different capacities). The tiny unit has least capital cost but the operational cost is highest. The capital cost increases while operational cost (per unit of LPG bottled) reduces as we move up in the chain. (assuming at least 90% utilization) The LPG is transported from Kakinada to the plant locations by Bullet trucks and bottled and sent to the demand points as LPG cylinders in trucks. The unit transport cost per unit of LPG per km for bullets is almost half of that of the truck cost. The cylinders also has some fixed cost associated with them on purchase. Given the demand points, formulate mathematical model to help Shakthi to decide on size and location of their bottling plants. Assume any other relevant data and indicate how you can get it. Will your model change if demand is expected to rise after the opening up of oil sector? As a management consultant how will you approach, if Shakthi has an option of having one more bulking terminal at Mangalore? 4. MILMA in Calicut has a very interesting problem. They have 380 rural milk collection centres of varying capacities. The milk will be transported in 1Tonne, 3 Tonne or 5 Tonne truck from these points to its factory at Kunnamangalam. As milk is perishable commodity the maximum time the truck can travel after collecting from first location is fixed. The availability of milk is highly stochastic as the farmer may divert his milk on an day if there is some function in the village. On the other hand Milma, being a cooperative is bound to collect (at least it should pay) all the milk offered by the farmer. The system work like this. Every afternoon a fleet of trucks will leave the company premises as per the route fixed (every day) by the company. They will collect milk as well as a chit from the collection centres indicating the amount of milk that will be available in the next day for collection. The trucks on reaching he plant will hand over

the chit to the route planner who will consolidate, estimate the availability and prepare the new route plans. Milma does not own the trucks. Depending on the route plans the company hire trucks every day. The truck company is on a fixed cum rate contract according to which Milma has to pay a fixed amount per truck, plus actual travel charges. Hence it is better for company to maximise the fleet usage. Another constraint the comapany face is reagrding transport of milk. As the village roads are kutcha, it is preferable that truck is full/nearly full during transport. Other wise churning will spoil the milk. The route planner is looking forward to IIMK to use its OR expertise to make the routes. Can you help them? What more data you require? 5. As a summer intern at Vayu Airlines ( a new joint venture domestic airline having 68 schedules per week mainly in Eastern and North-Eastern sector) you are given the task of scheduling the crew. The airline has an average of 10 flights per day with maximum of 14 flights on Monday and Friday and minimum of 6 flights on Sunday. A file give you flight schedules. There are 14 pilots, 16 Copilots, and cabin crew of 120. (each schedule require 5 cabin crew). The staff should be given minimum two days holiday per week (not necessarily continuous) and maximum number of schedule on any day is limited to 3. Prepare the schedule. What additional data is required? Should the airline hire more people? How many? If each crew give a preference weightage (in 100 point scale) for a schedule, will the model change? If the crew insists on adjacent holidays how will the model change? Assume each pilot give his preference of crew (P-Preference, I-Indifferent, C- Cannot accommodate) how will you incorporate this in the model. Pilot will not fly the plane if a crew who he/she had marked C is in the aircraft. As far as possible the co-pilot should be in the P category of the pilot. Date of Submission : 1 July 2003

Signode Tracko Components Ltd.

IIMK, 2003. Prepared by Prof. Saji Gopinath for class discussions. Do not depict efficient or inefficient handling of the management situation. Names are changed for confidentiality

The times have changed Mr. Goel, CMD of Signode Tracko Components Ltd, one of the countrys biggest electric component manufacturer, paused to take breath to conclude his hour long lecture on the annual meet of various Regional (sales) Managers of the organisation . Now You are not only responsible to increase the sales, but also to cut costs. With the economy under pressure, soon we will also feel the heat. It is high time that you should start thinking on the cost implications of your decisions. Let me see how we can make our planning operations more scientific The discussions that followed concentrated on the inefficiencies in the value chain and found that the company was carrying huge inventories to ensure sales. Mr. Goel asked Anand, Regional Manager of Southern Region to make a detailed study on the operations of the marketing department and bring out a plan to improve the situation. You should give us both short term and long term solutions Mr. Goel said as the parting remark The Company STCL is the major manufacturer of electric components that go into the production of many household white goods and electric equipments. There are mainly 7 product categories for STCL that are marketed directly to the white good manufactures and other electric equipment manufactures. Table 1 gives the details of these models and their approximate sales price. Even though STCL provides some amount of customization to suit the needs of the customer, in most of the cases the sales team is successful in making the clients accept the standard product available. The aggressive sales combined with good quality of the product made STCL maintain its position as market leader for last 15 years. The sales and marketing organization is very simple. The market is divided into 6 regions ( see table 2) and a regional manager will be in charge of each region. He will be responsible for the management of the sales of all product lines. Product managers for each product line and sales team will be reporting to the Regional Manager. Regional manager reports to the Corporate Vice president (Marketing) in the Corporate Office at Kolkata. The products are manufactured from any of the 10 plants of STCL located in various parts of the country. Each region has its own warehouse where the items will be stored before dispatch to the customers. STCL follow make-to-stock philosophy for most of its products. Each year, during August, the regional manger consolidates the estimates of the monthly demand for the next

calendar year obtained from various sales teams under him. After a brief scrutiny, wherein he may make some corrections based on his judgment, he will send it across to the corporate office with the preferred dispatch schedule. Based on this annual estimate the Corporate office will plan the production for the next calendar year on various plants and the dispatch policies of the products to the warehouses in the various regions. Depending on the sales during the first six months and the receipt of the products from the plants, the RM may send a revised estimate for the next six months. This mid course correction many times lead to urgent dispatches and revenue loss to the company. From the past experience Anand knows that there is a lot of difference between the ordering and dispatch quantity. To ensure the availability of components, he generally jack-up the demand before sending to the Corporate Office as well as populate his warehouse with adequate stock. We know that they (corporate Office) definitely will do some trimming, so we will increase our estimate by 5-10 or rarely 20%. If they send all the items we ordered, we will whip the sales team and they will ensure the sales. But it rarely happens.. Anand remembered the advice of the Regional Manager to him, some ten years back, when he enquired about demand overstating as a sales executive, during a training programme. Table 3 gives the order and dispatch quantities during the last year while Table 4 gives the order quantity and actual figures for the last five years for the seven products. The Approach Anand feels that the demand estimation need a thorough modification. So far he never thought about the implications of his over stating on the production. If he give accurate estimates, then there is high chance that he may get all that he needed. Reliable dispatch means low safety stock, which in turn will reduce stock in warehouse, which in turn will result in huge cost savings he calculated mentally while browsing through the pages showing sales of the previous years. But the million dollar question is how can he get the accurate estimates.? Table 1. The product profile of Signode Trako Cables Ltd Sl No Model/ Component No Customers Manufacturing Plants Price Per 000 units (Rs)

1 2 3 4 5 6 7

E11C479 E34C546 E34C789 E28B670 E79K564 E78K452 E91M321

Refrigerator Electric Motors Electric Motors Electric Fans & Blowers

Bangalore Palghat Kolkatta Daitiri Goa Electric Chimneys & Heavy Goa duty Industrial Blowers Palghat Ludhiana Electric Grills & Heaters Rajkot Bangalore Airconditioners & Freezers Kolkatta Rajkot Chilling Plants, Ice plants Bangalore Kolkatta Diatiri Electric Locomotives Kolkatta

250000 750000 3200000 1100000 900000 1400000 65000000

Table 2 The Marketing Organisation

CMD

VP(Prodn)

VP (Mktg)

VP(Fin &Admn)

RM (South East)

RM (East)

RM (South)

RM (North)

RM (West)

RM (Central)

Product Managers

Sales (Field) Personnel

Table 3: Order Estimates, Dispatches and actual sales for 7 products during 2001 (for Southern Region)
Period Order Estimate Qtr1 Qtr2 Qtr3 Qtr4 Total 11000 9000 9300 12000 41300 10000 7800 10000 12500 40300 E11C479 Dispatch Actual Sales 9980 11031 11960 12889 45860 E34C546 Dispatch Actual Sales 2000 2300 2000 2500 8800 1780 1734 1720 1765 6999 E34C789 Dispatch Actual Sales 3500 3700 4500 4700 16400 3609 3289 4001 3134 14033 E28B670 Dispatch Actual Sales 18000 19000 22000 20000 79000 19509 20001 20468 21211 81189

Order Estimate 2400 2200 2200 2600 9400

Order Estimate 4350 4200 4400 4300 17250

Order Estimate 20100 21000 21800 22000 84900

Period Order Estimate Qtr1 Qtr2 Qtr3 Qtr4 Total 3800 2900 3600 2700 13000

E79K564 Dispatch Actual Sales 3100 3000 3000 3300 12400 4016 2810 3409 2245 12480

Order Estimate 7800 8000 8000 8100 31900

E78K452 Dispatch Actual Sales 8000 7500 7500 8000 31000 6700 6750 6800 6780 27030

Order Estimate 180 190 200 210 780

E91M321 Dispatch Actual Sales 110 130 150 150 540 132 155 191 163 641

Table 4 : Demand Pattern for the seven products during the last 4 years

Product Sales (units)

Year Quarter E11C479E34C546E34C789E28B670E79K564E78K452 E91M321

4 3 2 1 4 3 2 1 4 3 2 1 4 3 2 1 9156 8100 7320 6540 5760 5100 4440 4068 3108 2928 2820 2544 2376 2136 1740 1980 1760 1720 1740 1774 1730 1711 1724 1735 1742 1728 1725 1764 1732 1711 1721 1747 2990 4021 3170 3580 3030 4025 3290 3542 3410 4080 3520 3780 3000 3700 3100 3300 18931 16191 15740 15971 14755 13980 12969 14606 14233 17405 16412 13213 12446 12310 11175 10159 2200 3000 2400 3200 1800 2600 2000 3100 1400 2200 1750 2600 1010 1845 1359 2000 6600 6450 6500 6300 6100 6200 6050 5800 5950 6000 5959 5678 5783 5811 5742 5612 129 159 126 93 108 144 84 78 93 108 75 69 60 42 51 36

2000

1999

1998

1997